Posted on 08/03/2005 4:51:43 PM PDT by RobFromGa
A simple question...
So, under the FairTaxI get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month. And businesses pay no taxes.
Where is the extra money coming from...
What is wrong with this reasoning below?
1. Right now the government collects $X in the form of all taxes.
2. All taxes are really paid for by consumers in the end result, either directly, or in the cost of their purchases which allow businesses to collect money in order to pay taxes. Companies do not really pay taxes they jsut collect them and pass them on.
3. The FairTax will collect the same $X per year in the form of taxes but using a different method.
4. Under the FairTax, the price paid for goods will not rise because getting rid of all the taxes built into goods will cause the prices to drop, then the FairTax will add onto the new lower price, resulting in the same price paid by consumers.
5. So, for a given taxpayer, shopping (consumption) will be revenue neutral. Ie. Prices are the same as before.
6. And each given taxpayer will get a "prebate" check every month that they are not getting now.
7. And each taxpayer will pay no taxes on capital gains, or on savings.
8. And, each taxpayer will no longer pay any taxes on income, or payroll taxes.
9. And, there will be no Fair Taxes on any purchases made for a business.
Are these all true so far?
Again, I get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month.
Where is the extra money coming from???
Where is the extra money coming from???
There is no "extra" money, it is already there contained within the economy as a whole in retarded growth as well as inefficient misallocation of production resources that are merely sterile exercises acting as surcharges on the backs of business and the economy.
The wage is what you are contacted to receive by your employer, gross paycheck without withholding.
The FCA sales tax rebate, is included in the tax rate charged.
Current prices of all goods and services are affected by a large component of tax related costs associated with the current tax system including, not only the tax remitted by business to government but costs associated with, tax planning and research as the tax code continually changes, the costs of services associated with any schemes for tax sheltering of income, the costs associated with tax litigation, fees and penalties arising from controverisies and audits with the IRS, any all costs born by business in lost productivity related to planning, accounting, filing, remitting the income/payroll tax. When those costs and taxes are removed from business, competition for market volume maximizing profit will drive prices downward in much the same manner as has happened with the consumer electonics industry with continuing technological productivity improvement in that field.
The net effect of repealing the requirements for income and payroll tax withholding and business taxes generally will be to reduce the overall burdens that now exist in the economy driving production down and pushing costs to the consumer higher, limiting investor gains, and driving wages for labor lower than they would otherwise be.
Economic Burden of Taxation
William A. Niskanen
Presented October 2003
Friedman Conference
Federal Reserve Bank Dallas page 6.
www.dallasfed.org/news/research/2003/03ftc_niskanen.pdf
"Given that the elasticity c implicit in recent U.S. fiscal conditions is about 0.8 and the average tax rate is about 0.3, the marginal cost of government spending and taxes in the United States may be about $2.75 per additional dollar of tax revenue. One wonders whether there are any government programs for which the marginal value is that high. Given the estimate of the long-term elasticity c from the U.S. time-series data, the marginal cost of government spending and taxes may be as high as $4.50 at the current average tax rate. "
LOL! You have just encountered the usual fantasy BS that the FT fans provide regularly here on FR.
You forgot to add in the cost of the matelial for the item. On the labor side, consider also the unimployment insurance and workman's comp. Boortz and the congressman said that the built in taxes in the price of any item are about 22%. Don't know how true it is.
The 22% is the costs of the tax system, not just the taxes per se.
I also own a small business and compliance costs are negligible. There are many similar businesses.
This brings up another concern with Fair Tax...
Right how when I spend money on business right now I get to deduct it as a business expense, and never pay taxes on it.
As a salesman many of these expenses are travel (airfare, auto mileage, hotels, meals), office expenses (phones, faxes, supplies, admin services), and marketing (postage, printing, promotional items, gifts). Supposedly I will be able to flash a card and that will save me the FairTax at the point of purchase.
Who is in charge of compliance here? Does the hotel front desk person question if my hotel stay is a business expense or am I on my honor? Since I will no longer have any compliance costs that means I won't be spending money on keeping records and defending myself in any kind of audit-- right?
I predict that almost every person will start a business and get a card.
Which aren't true? I listen to Boortz almost every day, and John Linder is my congressman so I've been following this. I just don't get it.
I think that the one that isn't true is that prices will remain about the same, I think they will go up by 25-30%.
Can this really be true? Can it be proven to a sufficient level of certainty to make it worth risking the health of the entire US economy (the best in world history) that you and the other Fair Taxers are right?
Boortz's response to a near identical question:
It's illegal now .. it will be illegal then. That same tax avoidance scheme is available to you right now. Why don't you get out there and try it? Let us know how it works out.
Trixie (and her pimp) are gonna buy stuff.
Right now there is a compliance method, I have to keep records and fill out forms and defend my expenses. Under the Fair Tax, since all the savings are coming by getting rid of compliance expenses, and there is no IRS to come after me, what would catch the person who cheats the system?
What do you deduct it from?... income taxes. That is, you pay the business expense with untaxed dollars.
Fair Tax allows business expenses to be paid with untaxed dollars. Business purchases are not taxed under fair tax at all.
Fair Tax doesn't withhold any self employment taxes. Fair Tax has no withholding from your paycheck.
State sales tax enforcers that already exist in 45 states. Ever tried messing with them?
I understand this. How will they be able to enforce what is and what is not a business expense?
Dear RobFromGa,
Obviously, compliance costs aren't going away for those of us who own small businesses. You ain't even SEEN compliance costs yet. :-(
sitetest
Boortz and the congressman said that the built in taxes in the price of any item are about 22%They all say that but not one of them can show how...If it's "hidden" how did they come up with the 22% figure HMMMMM?
The truth is ONE economist who has since bailed on the Fairtax did a study that came up with the 22% fallacy by including employee compensation such as employee's federal witholding (which they claim would not be deducted from paychecks) and the employer half of FICA paid on the employee's behalf.
I'll say it again,
Right now there is a compliance method, I have to keep records and fill out forms and defend my expenses. Under the Fair Tax, since all the savings are coming by getting rid of compliance expenses, and there is no IRS to come after me, what would catch the person who cheats the system?
And, I pay sales tax and city tax etc on all these business expenses now, just no federal income tax.
Yes, the amount of eliminated cost is virtually the same as the nrst. But the taxes themselves are but a portion of the costs that will be eliminated.
Depending on the number of links in the production chain, the income taxes alone can become arbitrarily close the the average income tax paid by each link. Same with payroll taxes. Same with compliance costs, same with every cost (not just those related to taxes).
You are in effect saying that the IRS and the present tax code is 100% inefficient. That all of the money that the government collects is equal to the amount of waste caused by the system.
Wrong, I am saying the current tax code is extremely inefficient in that it induces very high cost on business and depresses the economy. For every dollar that is collected by government as revenue, it costs business not only the tax they pay, but all the overhead costs imposed in minimizing and complying the taxcode as well as the costs imposed when business are required to direct resources into venues that are totally unproductive to meet government tax reporting and accounting requirements.
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